July 7, 2008 / 3:36 PM / in 9 years

Toronto stocks knocked down by oil

TORONTO (Reuters) - The Toronto Stock Exchange’s main index fell more than 2 percent on Monday, putting it on the cusp of a correction, as it was dragged down by weak resources and gloom over the outlook for economic growth.

<p>A general view of the TSX (Toronto Stock Exchange) Broadcast Centre in Toronto June 20, 2008. REUTERS/Mark Blinch</p>

Oil and gas companies led the descent, stung by a drop of nearly $4 in crude amid signs of easing tensions with Iran over its nuclear program.

But with the price of oil remaining high -- it is up more than 40 percent this year to above $141 a barrel -- intensifying worries over its impact on consumer spending and the economy took the broader market lower.

“We’re more and more digesting the fact that oil is a key ingredient and it’s very hard to grow an economy with oil at $140 or thereabouts,” said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc in Vancouver.

“It’s simply just an uphill battle to do that, so the bears are out today and they’re out in full force.”

The S&P/TSX composite index closed down 297.59 points, or 2.12 percent, at 13,712.80, with all but one of its 10 sectors pointing lower.

It was the first time the benchmark has closed in negative territory for the year since the end of April.

The Toronto benchmark has fallen 9.5 percent from the record high reached at the beginning of June, putting it close to an official correction, traditionally defined as a 10 percent fall from the peak level.

The energy and materials sectors shed 3.9 percent and 1.7 percent respectively. In the oil patch, Canadian Natural Resources was down C$3.47, or 3.6 percent, at C$92.34, and EnCana lost C$4.28, or 4.8 percent, to C$84.60.

The gold producers subindex was down 2.2 percent, alongside a slide in bullion prices. Kinross Gold was off 59 Canadian cents, or 2.6 percent, at C$22.59.

On the upside, Petaquilla Copper’s shares more than doubled, up 98 Canadian cents at C$1.94, after its joint venture partner, Inmet Mining, said it would make an all-cash C$320 million ($314 million) bid for the company.

Inmet edged up 99 Canadian cents, or 1.6 percent, to C$64.51.

Analysts said there was some trepidation that the coming earnings season could be a weaker one as companies feel the effect of soaring commodity prices and a dampened consumer appetite.

“I think we’ll still have earnings, just not the same degree as what we got used to,” Mastracci said.

BCE Inc was the most heavily traded stock with 21.1 million shares changing hands after the company said on Friday that its buyers had finalized funding and were staying with the C$34.8-billion purchase price of the leveraged buyout. BCE closed down 32 Canadian cents, or 0.8 percent, at C$39.32. It had risen 12.8 percent on Friday.

Market volume was 401 million shares worth C$9 billion. Decliners outpaced advancers 1,231 to 415. The blue chip S&P/TSX 60 index closed down 16.32 points, or 1.95 percent, at 819.62.

In New York, financial worries and falling energy companies took stocks lower, with the Dow Jones industrial average closing down 56.58 points, or 0.5 percent, at 11,231.96, and the Nasdaq Composite Index inching down 2.06 points, or 0.09 percent, at 2,243.32.

($1=$1.02 Canadian)

Editing by Peter Galloway

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